[Congressional Record (Bound Edition), Volume 155 (2009), Part 16]
[House]
[Page 21626]
[From the U.S. Government Publishing Office, www.gpo.gov]




     ON THE ONE-YEAR ANNIVERSARY OF THE LEHMAN BROTHERS BANKRUPTCY

  The SPEAKER pro tempore. The Chair recognizes the gentleman from 
Florida (Mr. Stearns) for 5 minutes.
  Mr. STEARNS. Madam Speaker, one year ago yesterday, a major 
investment bank, Lehman Brothers, declared bankruptcy, a move which 
sent the Dow Jones tumbling 500 points and simply led to a chain of 
events in which the Federal Government nationalized AIG with a $189 
billion bailout. The American auto industry asked Congress to authorize 
help, hundreds of billions of dollars, to bail out them. Banks did the 
same thing. Private institutions across this country asked for support.
  Today, just 1 year later, our Federal Government is in control of 
practically every sector of our economy, having spent almost $800 
billion or 5 percent of our GDP on a stimulus package that was pork-
laden and is still working to create jobs and boost this economy. And, 
most alarmingly, nothing has been done to cure the culture of bailouts 
that our government, with the help of the Federal Reserve, has 
continued to perpetuate. Bailout after bailout is not a strategy for 
economic recovery.
  My colleagues, we are at a critical point in our Nation's economic 
history. Financial regulatory reform proposals are being discussed here 
in Congress and across this country. We all agree that reform is 
certainly needed, but, unfortunately, the plan put forth by the Obama 
administration is not the kind of reform that will put an end to this 
culture of bailouts, nor will it bring transparency to the opaque and 
ever, ever expanding Federal Reserve. In fact, it does just the 
opposite.
  In June of this year, Treasury Secretary Geithner unveiled the 
administration's plan for financial regulatory reform, and the 
cornerstone of the proposal is centered on ceding vast new powers to 
the Federal Reserve as a means of preventing future financial crises. 
But this overreliance on the Federal Reserve is unwise.
  History shows us that in times the Fed saved us from one crisis, it 
inadvertently instigated another one. In 1913 when the Fed was founded, 
it was intentionally set up to serve as an institution that could help 
cushion the blow when banking crises occurred. However, the problem 
with an institution that is designed to insulate banks from the 
consequences of their own poor investment decisions is that it also 
inadvertently encourages these same banks to keep taking unwise risks, 
thereby laying the groundwork for a vicious cycle of bailout after 
bailout.
  In fact, every time there is a potential financial crisis, the 
Federal Open Market Committee quickly cuts short-term interest rates. 
These cuts have become larger over time, as evidenced by our current 
zero percent interest rates. And, more importantly, these cuts 
essentially function as a bailout to those banks that have run into 
financial problems. Banks know they can count on the Fed to lower 
interest rates during times of financial distress, and markets know the 
Fed is always prepared to provide loose credit to financiers facing big 
losses.
  Now, what lessons have the banks learned from the financial crisis? 
The truth is that if they get into trouble, the Fed will be there to 
lend unlimited amounts of money at extremely low interests rates. So 
where is the motivation then for curbing risky investment behavioral by 
these banks? The only one on the proverbial financial hook under a 
current Federal bailout system is you, the taxpayer.
  Yesterday, President Obama gave a speech on financial reform at 
Federal Hall on Wall Street. Ironically, Federal Hall is where the 
founders of our great Nation once bitterly argued over how much the 
government should control the national economy.
  In his speech, the President warned Wall Street that they shouldn't 
ignore the lessons from the past financial and current financial 
crisis. They shouldn't become complacent and expect future bailouts. 
Yet the financial regulatory reform, the plan the President's 
administration is putting forth, calls for expanding the powers of the 
Federal Reserve, and the Fed is essentially a bailout machine for the 
financial sector. Clearly there is a discrepancy between the 
President's rhetoric and the reality of the policies.
  In 55 B.C., the great Roman statesman Cicero wisely said, ``The 
budget should be balanced, the treasury should be refilled, public debt 
should be reduced, the arrogance of officialdom should be tempered and 
controlled, and assistance to foreign lands should be curtailed, lest 
Rome become bankrupt.''
  My colleagues, looking back on the one-year anniversary of the Lehman 
Brothers bankruptcy, we would do well to heed Cicero's advice and seek 
out financial reform policies that will steer us away from the practice 
of bailouts and the policies that will bankrupt future generations. My 
colleagues, America is too great a country to not learn from its past 
mistakes.

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